It was almost inevitable that Dublin would emerge as the hub of a thriving fintech sector in Ireland. The co-existence along the banks of the Liffey of the well-established International Financial Services Centre (IFSC) and the more youthful “Silicon Docks” with its coterie of world leading born-on-the-internet firms created an ideal breeding ground for the new sector, which merges traditional financial services with the latest advances in social media, data analytics and artificial intelligence technologies.
According to the Fintech & Payments Association of Ireland (FPAI), fintech in its broadest sense comprises every area of technology and innovation in the financial services arena, including payments, trading and foreign exchange, big data, risk, compliance, business intelligence, consumer-focused currency exchanges and peer-to-peer lenders.
This very broad scope makes it difficult to estimate with any degree of accuracy the size of the sector in Ireland. “Fintech comes in lots of shapes and sizes”, says Enterprise Ireland senior development adviser Billy Hanley. “On the one hand you have pure fintech companies such as payment companies facilitating transactions through technology. And then on the other you have technology companies selling cybersecurity products to banks and so on. You also have things like payroll solutions not primarily aimed at financial services. Then there is the start-up category of fintech company all the way up to the very large banks who are investing in it. This makes it very difficult to put a size on it.”
The most recent estimate comes from the FPAI, which in its 2016 Strategy for Fintech in Ireland stated “in Ireland there are approximately 40,000 people employed within financial services, and a further 100,000-plus working within technology. According to the IDA and Enterprise Ireland, approximately 8,800 people were employed in fintech in Ireland at the end of 2015, a rise of 7 per cent on a year before and 40 per cent up on 2008.”
KPMG tax partner and fintech lead Anna Scally points to more subdued growth in the sector in the early part of this year, however. “KPMG’s Pulse of FinTech provides a global analysis of investment in fintech,” she says. “In Q1 overall investment in fintech in Europe grew with $880 million invested across 89 deals. While investment in Irish fintechs was modest in Q1, the recent €25 million fundraising by Plynk will serve to boost the Q2 numbers.”
The Government’s IFS 2020 strategy for the financial sector is targeting the sector for growth in the coming years, noting that the “thriving tech start-up scene, combined with established research centres, creates what is an internationally recognised ecosystem for Fintech research, development and innovation. As a result, Ireland is uniquely positioned to become a leading global centre for fintech investment, where global multinationals can develop and implement their innovation strategies, while Irish-owned start-ups continue to scale up and succeed in global markets.”
Andreas Hoepner, who recently joined the UCD Michael Smurfit Graduate School of Business as professor of operational risk, banking and finance, believes Ireland has significantly better opportunities for growth than Britain in the fintech space.
“Having excellent computer scientists and a strong financial services sector is very important,” he says. “This helps to bring about a culture where you build things that work rather than just build things that you can sell. Finance is getting more and more digital, and having access to programmers and computer scientists is a necessity for the industry. Ireland offers that.”
He also believes that the regtech sub-sector, which deals with the automation or regulatory compliance, also offers interesting prospects for Ireland. “Regtech represents a fantastic opportunity for Dublin, which could be a great breeding ground for it.”
Ulster Bank is an example of a traditional, mainstream bank that is developing and implementing its innovation strategies in collaboration with Ireland’s fintech start-up community. Ulster Bank partnered with Dogpatch Labs, the Dublin based co-working space for tech and fintech start-ups, to assist it with a significant expansion two years ago. The space serves as an off-site innovation hub for Ulster Bank, for workshops and showcase demonstrations. The bank’s innovation solutions team is also located there.
“We are a proud partner of Dogpatch Labs,” says Ciaran Coyle of Ulster Bank. “We were delighted to help Dogpatch with its expansion but Ulster Bank is also gaining from the deal. It exposes us to a very different environment. Our innovation solutions team is working shoulder to shoulder with start-ups in fintech and other related areas. Earlier this year we held a hackathon on innovations in banking there and we had people from 34 different countries participating.”
The partnership is also helping with the change process required by the digital revolution in banking. “The recent European Banking Association conference in Dublin looked at how banks could adapt to the digital age. The challenge is actually cultural rather than technological. Our culture has evolved over centuries and it won’t be easy to change. Working with the start-ups and entrepreneurs in Dogpatch will help us with that.”
Access to executives
Accenture is another organisation that is playing a direct role in the development of Ireland’s fintech ecosystem. The firm’s FinTech Innovation Lab is a three-month accelerator programme based at the Guinness Enterprise Centre in Dublin that provides start-up and early stage fintech enterprises with direct access to senior executives in Ireland’s leading financial services and technology companies.
Participating organisations include AIB, Bank of Ireland, Credit Suisse, Citi, Fexco, Google, Realex Payments, and State Street.
The aim, according to Accenture, is not just to assist the fintech companies with assistance in the development of their innovations, it is also to give them a foot in the door to the financial services community. By introducing them directly to the banks and other organisations, the programme helps them start conversations on potential joint projects. Accenture is also keen to stress that the programme is firmly focused on supporting disruptive fintech innovations rather than merely finding good investments.
Enterprise Ireland sees strong growth prospects for the sector and has ramped up support for it. “We have strengthened the team dealing with fintech and last year we launched a dedicated fintech Competitive Start Fund,” says Billy Hanley. “It is quite unusual for us to do a sector-based fund but we feel that the very good growth prospects for fintech warrant it.”
The purpose of the Competitive Start Fund is to accelerate the growth of start-up companies that have the capability to succeed in global markets. Participating companies receive up to €50,000 in equity funding and access to Bank of Ireland’s Innovation Team and desk space at Bank of Ireland’s new dedicated FinTech startlab. In addition, they also benefit from a series of masterclasses provided by industry experts.
And Anna Scally predicts a wave of expansion on the way to take advantage of this. “The deadline for implementing Payment Services Directive 2 (PSD2) is now fast approaching and as we move through 2017, new fintech business models will almost certainly evolve to make the most of open data and to capitalise on new opportunities.”